BUDGET: BENEFICIARIES GIVE HOSTILE REACTION TO NEW DRAFT COMPROMISE.

While the European Commission President and EU Budget Commissioner Dalia Grybauskaite welcomed what they called the "start of real negotiations" on the 2007-13 financial perspective, the majority of delegations except for the six net contributors (Germany, the UK, Sweden, Austria, France and the Netherlands) plus Spain clearly felt that the new outline compromise was a backward step compared to the earlier version tabled by the Luxembourg Presidency on March 8 (see Europe Information 2944, Section I).

Introducing the new "negotiating box", Luxembourg foreign minister Jean Asselborn said that though there were no figures for the individual headings it was clear that the overall amount would be lower than the 1.14% of gross national income called for by the Commission in its 2004 proposal. He highlighted changes made on sub-heading 1b of cohesion policy but said it was necessary because of the direct link between the amount of money and the distribution of funds among different sub-sections. He also singled out the fact that there was as yet no proposal for a reform of the system of the "own resources" system but that the Presidency would present one as part of a new revised "negotiating box" which would be ready for a "conclave" of EU foreign ministers on May 22.

The reaction from the Group of Six net contributors was reasonably positive, saying that the new paper was a "good first step" while not being enough. In particular the G6 seemed to welcome the attempts by the Presidency to make savings, especially by reducing the amount for 1b by lowering the rate of additional top-ups to individual regions' allocation based on relative prosperity.

However, the first barrage of criticism came from the so-called Visegrad group of countries (Poland, Hungary , the Czech Republic and Slovakia). Poland's representative said that he was very unhappy about the 4% of GDP maximum limit on the amount of money a country could receive from the structural funds being lowered. In the new Luxembourg paper, it maintains the 4% limit despite earlier calls for flexibility from several new member states, while introducing a new system of differentiation which would further limit countries' eligibility depending on their per capita gross national income relative to the EU25 average. The Polish representative claimed that his country would have been eligible for up to 8% of its GDP.

Hungary's representative said it was "almost impossible" to find a solution in June...